Bank of America Corporation

Read the “Bank of America” case that I will attach and answer the following questions:

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Bank of America

14 Cor – oration – 2011
Fred R. David
Francis Marion University
BAC
www.bankofamerica.com
Headquartered in Charlotte, North Carolina, Bank of America is one of the largest banks in the
United States with 5,800 locations domestically and another 300 offices abroad. The bank provides
consumer and small business banking, corporate banking, credit cards, mortgage lending, and asset
management. With its 2009 acquisition of Merrill Lynch, Bank of America is also one of the world’s
leading wealth managers with more than $2 trillion under management.

Bank of America serves individual consumers, small- and middle-market businesses,
and large corporations with a full range of banking, investing, asset management, and other
financial and risk management products and services. The company serves approximately
58 million consumers and small businesses with retail banking offices, about 18,000 ATMs,
and online banking with 30 million active users. Bank of America is a global leader in corpo-
rate and investment banking and trading across a broad range of asset classes, serving corpo-
rations, governments, institutions, and individuals around the world. Bank of America offers
industry-leading support to approximately four million small business owners through a suite
of innovative, easy-to-use online products and services. The company serves clients through
operations in more than 40 countries.

From March to June in 2011, Bank of America’s stock price dropped to a 52-week low of
below $10.50. The company has no real dividend to offer to prop up its share price. Many banks
increased their dividend payout in early 2011, including J PMorgan Chase, Wells Fargo, USB,
and BNY Mellon. Even weak Citi group reinstated its dividend at $.01 per share. However, Bank
of America has told investors there would be no dividend increase in 2011. Since that disap-
pointing announcement in March 2011, Bank of America’s stock price dropped 25 percent to the
lowest level since the summer of 2009, when many people questioned whether Bank of America
would survive at all. Comparably, JP Morgan Chase’s stock price dropped 8 percent from March
to June 2011, Wells Fargo’s stock price dropped 17 percent, US Bancorp dropped 9 percent,
BNY Mellon dropped 10 percent, and Citigroup dropped 15 percent.

On August 7, 2011, AIG, the huge bailed-out insurer company, sued Bank of America over
$10 billion in losses on mortgage-bond investments, saying it was the victim of a “massive fraud.”
AIG contends that Bank of America and businesses it took over-Countrywide Financial Corp. and
Merrill Lynch & Co.-misled AIG as they sought to profit off the bundling of mortgages into securi-
ties. The AIG lawsuit is the latest legal pressure faced by Bank of America Chief Executive Officer
Brian Moynihan, 51, who took over as CEO last year. With its undesirable purchases of Countrywide
Financial and Merrill Lynch, Bank of America appears to be an example of bad banking behavior.

On August 8, 2011, Bank of America’s stock closed down 20 percent and traded four times
its average daily volume of 163 million shares. Bank of America’s stock had fallen more than
50 percent from its 52-week high reached in April 2011. Shares of the country’s largest con-
sumer bank fell $1.66 to $6.51. Except for a previous downfall in bank stocks in March 2009, it
represented a level not seen for two decades. Over the past three years, Bank of America’s stock
has fallen 80 percent to $6.51 from $32.25. August 8 was also the first day where the market
was able to react to Standard & Poor’s decision to downgrade the U.S. debt rating. That deci-
sion sent the Nasdaq and the S&P 500 down about 7 percent, and it likely affected investors’
1. In not more than one paragraph, state the central issue in the case.
2. List the strengths, weaknesses, opportunities and threats of the company as identified in the case. Provide a separate list for each category.

3. Comment briefly on the financials of the company between years 2009 and 2010.

4. If you were a consultant invited to look at the entire situation of the company at the time the case was written, what would be your recommendations going forward into the future?

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